Stocks Rally, Euro Falls After ECB Move
Central Bank Announces Bigger-Than-Expected Program of Asset Purchases
ECB President Mario Draghi said the central bank would buy €60 billion ($69 billion) of public and private sector debt every month until September 2016 in an effort to boost inflation back to its target of close to 2%. Although the introduction of a large-scale bond-buying program was widely expected, analysts and investors said the size was toward the upper end of expectations.
Earlier, the ECB kept interest rates on hold at record lows, as expected.
Equity markets in Europe gained. The Stoxx Europe 600 added more than 1% to a fresh seven-year high before dropping back slightly to trade 0.7% higher.
U.S. stock futures indicated a 0.5% opening gain for the S&P 500. Changes in futures aren’t necessarily reflected in moves after the opening bell.
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The size of the proposed program “is above our and the market’s expectations,” said Andrew Bosomworth, head of portfolio management in Germany at PIMCO.
Bonds in the eurozone also rallied. German government bonds, which had weakened ahead of the announcement, chalked up small gains, pushing 10-year yields down to 0.49%.
Treasury bond yields also fell slightly to 1.92%.
Market TalkOil Gives Up Gains
Oil gives back gains from earlier in the day after the European Central Bank announces its quantitative easing program. Brent is trading just 0.4% higher while WTI is down 0.1%—both had been up as much as 2.5% earlier in the day. The euro fell after the ECB’s news, making dollar-denominated commodities such as oil more expensive for holders of the common currency. (firstname.lastname@example.org; @georgikantchev)
German Government Bond Yields Fall
10-year German government bond yields fell by three basis points to 0.49% immediately after Mario Draghi announced the ECB would buy €60 billion in high-grade bonds a month up until the end of September 2016 at least. The rally was short-lived, however, with yields rebounding to 0.52% minutes later, according to Tradeweb, just below their level before Draghi began speaking. The current yield is 0.51%. (Christopher.email@example.com)
U.S. Stock Futures Rise
As expected, the ECB refilling the punch bowl has risk assets rising in the wake of Draghi disclosing details of the central bank’s QE effort. U.S. stock futures have jumped, with Dow industrial futures going from up about 80 at the bottom of the hour to 135 presently. Meanwhile, the euro has slid toward $1.1550 from above $1.16 and oil has pulled back as the dollar strengths, shedding a good bit of its earlier gains. Treasurys have weakened further, with the 10-year yield now at 1.93%. (firstname.lastname@example.org)
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